Some of the biggest breakout successes in business history have been the product of iconic founding teams that combined technological foresight and customer insight. Think Steve, Woz, and Apple.
These symbiotic relationships do not always scale well, however. As companies grow and mature, even highly successful startups tend to organize themselves by function, and the functions morph into silos. The crucial link between technology and product on one side and customer and market insight on the other can break down. Our research, supported by our case experience, suggests that the disconnect between product-facing teams (often in R&D or product development) and customer-facing teams (often in business development, marketing, or sales) is the number one obstacle to innovation success.
Not all firms struggle. Leading innovators build success upon success with a seemingly infallible ability to think about product and customer together. Amazon, with its customer-obsessed, day-one mentality, is a good example. For this year’s report, though, we ventured beyond lessons from digital-native innovators to ask: What can we learn from companies that are not yet in the spotlight but nevertheless lead innovation in their respective industries? Are they pioneering new management practices or simply putting well-established methods to new use in innovation?
We interviewed executives at ten industry-leading innovators that have found ways to overcome barriers between their product- and customer-facing teams. We offered to exchange anonymity for candor, and here we report on the practices they apply to maintain and sometimes reinvent this relationship.
FOUR TYPES OF SOLUTIONS
Companies across the board are coming to grips with this challenge. In 2020, 30% of the companies in our survey reported that they were focusing on this issue as their top innovation priority, and another 27% plan to make it their top priority in 2021.
Leading companies already deploy an array of solutions to bridge the divide between product development and sales and to build momentum for more disruptive innovation. These efforts range from the strategic (such as using M&A to fill capability gaps) to the day-to-day (requiring greater co-location of people from different functions).
We recently studied ten great performers in multiple industries to determine how they address this divide. The companies we analyzed include members of BCG’s 50 Most Innovative Companies and other standouts in individual industries.
We discovered that leaders that build the requisite links between their technology and product development teams and their customer-facing teams excel at three increasingly important types of innovation. Heading the list is disruptive product innovation—being first to find valuable use cases for a new technology. Second comes digital service innovation—adding digital service or subscription revenue to existing high-performing product- or hardware-driven business models. Third is business model innovation—radically innovating the core value streams of a business to deliver value to new customer groups or find new ways to monetize or deliver products or services.
Four types of solutions, implemented singly or with others, have shown significant success:
- Build a one-team mentality.
- Align incentives with matching metrics.
- Establish clear lines of communication, mandates, and accountability.
- Shift the status quo and celebrate success.
Here are some examples of what leading innovators in their respective industries are doing in each of these areas.